Replication data for: Economic Interdependence and History: A Closer Look at Diffusion

Policymakers have to adjudicate between two competing sets of information when making decisions: the experiences of other states with which they have strong interdependent ties, and lessons from their own historical record. We show that the effects of diffusion mechanisms are mediated by (a) the degree of economic interdependence between countries, and (b) a country's degree of trade exposure, providing a more accurate measure of diffusion compared to current approaches. A state is more likely to open its capital account when other states with which it has economic ties also liberalize their capital account, but this effect declines as levels of trade exposure increase. Second, we argue that states are affected not just by the international economy but also by their own historical experience of trying different economic policies. While we found a counter-intuitive negative relationship between a country's economic history and its current levels of capital account openness, we suspect this result is driven by an intervening, non-linear effect of inflation that can be investigated in future research. We also discuss the challenges of making causal inferences using time-series cross sectional data, demonstrate ways to improve methodological rigor, and discuss the trade-offs involved in choosing between different models.